Accounts Payable Audit Checklist

By implementing comprehensive audit procedures and leveraging automation tools like Alaan, businesses can streamline their audit processes, mitigate risks, and enhance financial transparency. The accounts payable ledger provides a detailed summary of all outstanding debts. Auditors reconcile this ledger with the company’s general ledger to confirm that all liabilities are accurately recorded.

The critical steps for a comprehensive, compliant accounts payable auditing process

These range from manual data entry mistakes and invoice duplications to missed discounts, late payments, and inaccurate coding. This intricate process further results in unapproved invoices, incomplete documentation, vendor communication gaps, and mismatched purchase orders. Your employee receives the vendor invoice and goes to the department manager and procurement department for three-way matching — invoice, purchase order, and goods receipt. Finally, the accounting department makes the journal entries and updates accounting records. Audit procedures are the modest steps that auditors deal with to verify the accuracy of their clients’ balances and accounts.

Research Vendor Activity

• For instance, delayed invoice approvals could lead to late payment penalties, while manual invoice matching might slow down the payment cycle.
• Please note that in one audit procedure is able to ensure one or more audit assertions.
• Every action in an automated AP system is recorded, creating a detailed digital accounts payable audit report.
• For the audit of Accounts Payable, the level of inherent risk is also directly dependent on the nature of the business, in addition to the complexity of the transactions that take place.
• Data analytics tools can help identify unusual patterns or anomalies in payment data that might indicate fraud or errors.

Most auditors audit of accounts payable will contact regular suppliers and vendors, regardless of whether there is an outstanding balance or not. This happens one year later to ensure all recommendations have been met and the desired results have been achieved. That’s because it’s quite easy to increase a company’s net income by not recording end-of-term payables. This results in many types of theft and is the reason why AP is often the sole focus of audits.

Step AP Audit Procedure

In normal cases, the ratios shouldn’t be much different from the previous year; hence, we should expect the accounts payable’ turnover and account payable days to stay around the Travel Agency Accounting same as the previous year. Therefore, we usually need to investigate further if there is a significant difference in the result.

• It involves sifting through stacks of paperwork, expense reports, old receipts, etc.
• An accounts payable audit helps catch these errors early, minimizing the chances of financial misstatements or fraudulent activity.
• This step ensures that credits are applied accurately and balances are correctly reflected in the accounts payable ledger.
• Examine the vendor onboarding process to rule out any unauthorised or fictitious vendors.
• After completing the foundational steps of an accounts payable audit, the focus shifts to uncovering unrecorded liabilities—an essential process to ensure comprehensive and accurate financial reporting.

Audit Procedures for Accounts Payable

Interview team members who handle different parts of the process, as they often have valuable insights about potential weak spots. Ongoing training keeps your accounts payable staff sharp and aware of emerging fraud schemes. Schedule quarterly sessions covering topics such as invoice verification techniques, red flags for fraudulent documents, and proper approval workflows.

Automatically capture and organize data and documents

The audit team will consist of the lead auditor, staff auditors, and specialists as needed. The team members will be assigned specific tasks based on their expertise and the areas to be audited. The primary aim of this audit is to express an opinion on the fairness of XYZ Company’s financial statements in accordance with Generally Accepted Accounting Principles (GAAP).

• Gather and highlight documents such as one-off vendor contracts, invoices without POs or contracts, and receipts for cash transactions.
• Audits in this regard mostly start off backward with year-end financial statements like Balance Sheets, Income Statements, as well as Cash Flow Statements.
• In fact, more than 80% of organizations using AP automation have increased efficiency and 63% have gained faster, more timely payments, according to MineralTree’s 8th Annual State of AP Report.
• They will attempt to establish the legitimacy of a transaction by contacting suppliers and vendors for a confirmation request.
• This is done by obtaining a list of all cash disbursements made after year-end.

For example, using a spend management system like Alaan to track all transactions or implementing an AI-powered tool for expense verification could significantly reduce processing time and improve accuracy. This is the same audit procedure to ensure the completeness assertion as described in the above. AvidXchange offers AP automation software that lets AP teams create customizable routing rules, tracking every action and invoice with a detailed audit trail for full https://www.sonad.io/2025-massageminder-appointment-books-and-refills/ historical accounting visibility. Though there’s not a consistent set of standard operating procedures (SOPS) for AP audits, every company typically experiences an accounts payable audit in a series of phases. Create a process for vendors to submit changes directly through a secure portal, and always verify banking changes through a separate communication channel to prevent fraud.